Five-Star Hotel Rates to Drop, Hotwire’s Bason Says

Expedia Inc.’s Hotwire.com discount division expects hotel, airline and car-rental prices to resume their decline next month, led by cuts at five-star hotels as business travel “remains very depressed.”

Aug. 20 (Bloomberg) -- Expedia Inc.’s Hotwire.com discount division expects hotel, airline and car-rental prices to resume their decline next month, led by cuts at five-star hotels as business travel “remains very depressed.”

“There’s one last big drop in pricing for the industry that starts this September,” Hotwire President Clem Bason said today in an interview. “Five-star rates need to drop, it needs to happen,” he said, predicting prices of about $150 a night in most U.S. cities.

Hotwire, which lets travelers book hotels by location and description at a cheaper-than-advertised rate by withholding the property name during selection, said revenue rose 24 percent in the second quarter as vacationers sought online bargains during the worst travel slump “in decades.”

Many hotels are forecasting average daily rates to fall another 1 percent next year, Bason said. That’s because of weak demand and too many empty rooms in new or renovated upscale hotels in areas including San Diego, Las Vegas, Phoenix, Orlando, Florida, Hawaii, Mexico and the Caribbean, he said.

Average U.S. daily hotel rates fell 8.7 percent to $98.66 in the first half of the year from a year earlier, while occupancy tumbled 11 percent to 54.6 percent, according to data compiled by Smith Travel Research Inc.

“You won’t see any meaningful recovery through the first half of 2010, you might get a little bit but nothing of any scale,” Bason said. “Next year the key word will be stabilization, but not growth.”

Fare Sales

U.S. airlines have reduced prices to attract leisure fliers as businesses slash travel budgets. Traffic, which is measured in miles flown by paying passengers, has tumbled for 14 straight months at the six major U.S. carriers.

“We don’t see any let-up,” Bason said. “The fare sales are coming fast and furious, one after the other, every week there’s another one. Southwest drives it and everyone matches.”

Labor Day is “very open,” as people wait until the last- minute to book getaways, said Barbara Messing, vice president of Hotwire’s Travel Ticker unit.

“There’s not a single market where you cannot get a good Labor Day deal now, except maybe the Hamptons,” Messing said. “When there’s still rooms on these high-demand weekends which in the last five years have been sold out, then we still haven’t bottomed.”

Expedia, parent of San Francisco-based Hotwire, rose 72 cents to $22.60 at 4 p.m. in Nasdaq Stock Market trading. The shares have more than doubled this year.